Obesity-related type 2 diabetes mellitus, characterized by insulin resistance, currently affects 150 million people worldwide. In the insulin resistant diabetic state, blood glucose levels are elevated due to increased glucose production from the liver (mainly through de novo glucose synthesis, gluconeogenesis) and decreased glucose disposal in fat and muscle. We recently identified MAP kinase phosphatase 3 (MKP- 3) as the top candidate for antagonizing the repressive effect of insulin on liver gluconeogenesis. We demonstrated that expression of MKP-3 is elevated in the liver of obese mice and MKP-3 overexpression is sufficent to promote gluconeogenesis in hepatocytes and elevate fasting blood glucose levels in lean mice. Reduction of MKP-3 expression by RNA interference decreases gluconeogenesis in hepatocytes and lowers fasting blood glucose levels in obese mice. Although the only known substrate of MKP-3 is ERK and activation of the ERK pathway can partially repress gluconeogenic gene expression, disruption of ERK function can not reverse the repressive effect of insulin on gluconeogenesis. This indicates that MKP-3 attenuates insulin signaling through a novel mechanism. Forkhead transcription factor FOXO1, which can be activated through dephosphorylation that leads to consequent nuclear translocatin to initiate the gluconeogenic program, is a critical factor for insulin to repress glucose production. Our recent data indicate that MKP-3 interacts with FOXO1, synergizes with FOXO1 to transcribe PEPCK and G6Pase genes, decreases insulin stimulated FOXO1 phosphorylation and increases its nuclear translocation. Furthermore, overexpression of the dominant negative FOXO1 can block MKP-3 stimulated gluconeogenic gene expression and glucose in primary hepatocytes and nuclear FOXO1 is decreased by hepatic MKP-3 knockdown. Interestingly, the gluconeogenic effect of MKP-3 is dramatic in primary hepatocyes and mild in Fao cells, which are devoid of gluconeogenic amplifier PGC-11. Knocking down PGC-11 expression in primary hepatocytes essentially abolished the effect of MKP-3 on gluconeogenic gene expression and glucose output. We hypothesize that MKP-3 antagonizes the inhibitory effect of insulin on gluconeogenesis through activation of FOXO1 by dephosphorylation and PGC-11 is a critical co- activator. The specific aims are: 1) Define the role of FOXO1 in MKP-3-mediated gluconeogenesis; 2) Modulate hepatic MKP-3 expression and evaluate the effect on gluconeogenesis and glycemic control; 3) Understand the downstream target of MKP-3 promoted fasting hyperglycemia in vivo. The goals will be achieved through reporter assays and adenovirus-mediated gain and loss-of-function studies in cultured liver cells, primary liver cells and in the liver of normal as well as obese animals. Results generated from this proposal will provide key information to understand the mechanism of action of MKP-3 and evaluate its candidacy as a new therapeutic target for treating obesity-related type 2 diabetes.